Matthew Brickman:

Hi, I’m Matthew Brickman, Florida Supreme court mediator. Welcome to the Mediate This! Podcast where we discuss everything mediation and conflict resolution.

I received a question from a listener that says, How are life insurance policies and wills affected by divorce? So let’s first start with uh the will. The will’s really simple. Um, the will is not affected by a divorce. Um, your living will is separate. So you may need to update your living will after your divorce because you may not want to name your spouse as a beneficiary, um, or you may not still own a piece of property that is in your will because maybe it got divided or sold or given uh to the other party in the divorce. So somebody gave me a really good rule of thumb a while ago that said, you know, a living will needs to be reviewed and probably updated every two to three years because of the fact that you know we buy and sell and gain and get rid of things on a regular basis. And so it’s good to update uh the will. So the will you may just want to update after your divorce, but your divorce isn’t going to supersede your will. Um so life insurance policies. Let’s talk about life insurance. So it depends. There’s really, I guess, as far as I understand, when it comes to uh mediation and divorce and equitable distribution, you’ve got two different types of life insurance policies. You’ve got term life and you’ve got whole life. So let’s talk um whole life first. Whole life is a type of insurance that has a cash surrender value. So some people refer to as refer to it as like a small investment account. So maybe you’ve got a whole life insurance policy that has a cash surrender value, say of $5,000. Well, if you accumulated that during the marriage, and accumulated means you purchased it and put marital monies into it while you were married, well, then you’re going to need to divide that up. So let’s say that John has a whole life insurance policy and uh it’s worth $5,000 and he’s going to keep it in the divorce. Well, then uh his wife would be entitled to half of the value. He could still keep the policy, but she’d be entitled to half the value. Um sometimes people will cash them in because maybe they don’t have the money. The biggest one I’ve ever seen, I think, had like $50,000 cash surrender. And so that would be a $25,000 buyout. Uh they didn’t really have anything else, so they had to sell it, and they each got their $25,000. Um, now then there’s term life insurance. So term life insurance um says it does not have a cash surrender value. So for example, I have a term life insurance policy. Um, it’s worth $500,000. I pay every single month for it, and if I die uh before the expiration of the term, and I think I have a 30-year term, well then it will then pay out $500,000. If I don’t die and the 30 years uh comes, well then it just expires. And if I want to get a new one, well then I’ll get a new one at that time. So what does the term life insurance uh have to do with a divorce? Well, so if there’s child support payments that may be owed, or if there’s alimony payments that could be owed, well then a term life insurance policy can be used to then guarantee those. So let’s say, for example, that um the husband has a uh $100,000 alimony obligation spread out over time that he’s going to be paying the wife. Well, either if he has an existing term life insurance policy, then he would have to designate, let’s say that he has a $300,000 policy, then he would have to designate $100,000 and name his soon-to-be ex-wife as the beneficiary so long as there is an alimony obligation. The other $200,000 he could name whoever he wants. He could name an adult child, he could name a relative, maybe a new spouse, but um for that hundred thousand, that would be for the wife so long as there is an alimony obligation. Um, let’s say for example, and I’ve seen this done, and you know, it just takes a little bit of math, but you know, let’s say, for example, that um every year he’s paying it down by $10,000. Well, then what he could do, and sometimes we put this in the agreement, is you know, on the first of every year, the husband can then reduce the amount that he owes on his life insurance to the wife by the amount paid. So let’s say year one, he owes $100,000. So he designates $100,000 of his three to the wife, but then he pays, and then at the end of the year he now owes $90,000. Well, then he can go in and change his life insurance policy and say now $90,000. Seems to be a little much, but some people want to do that as they pay a down. Now, when it comes to not having one in place, well, let’s say, for example, that the husband owes $100,000 in alimony, but he does not have a life insurance policy. Well, at this point, it’s important to know the rules and laws and stuff and your the statute in your particular state. You may need to talk to an attorney and find out what the law is. Um, I know that in Florida it says that as long as it is reasonably available and reasonably affordable. And so, well, define reasonable. Well, usually only a court of law can define reasonable, but usually between a mediator and attorneys, we, you know, and then the parties can then define on their own what they believe to be reasonable or not. So as long as it’s reasonably available and reasonably affordable, we’ll then find the husband would have to get one to guarantee his support obligation. That way, in case the husband, safe, God forbid, he’s on the highway and gets in an accident and dies, at least then the wife is then paid the remaining monies that she would have gotten as though he lived through the life insurance policy. And that’s also why sometimes people will reduce it yearly so that you know if they’ve if they’re five years into it and then they die, well then their ex doesn’t get the full amount that was owed. Okay, now let’s switch uh gears to child support. So in any child support calculation, if you look at the actual calculation in the child support guidelines worksheet, when you’re doing all the math and it’s dropping down, it says child support owed from the father to the mother is X, and then child support owed from the mother to the father is X. And then you do the math and it subtracts out and it says, okay, well, then either the mother owes the father or the father owes the mother. So when it comes to child support, technically, both parties, even if the father is the one that owes the mother, if you look at the child support guidelines worksheet, the mother owes the father, the father owes the mother, and then you do the subtraction and one person owes the other. So technically they’re both paying child support. So again, so long as it is reasonably available and reasonably affordable, well then both parties should obtain life insurance to guarantee the child support, especially when there’s equal time sharing, but even if there’s not equal time sharing. I mean, let’s say that the father has a 60-40 time sharing, and so you know, he’s one day a week away from 50-50. But um, let’s say that he has a 60-40, he has a child support obligation, but that child support obligation is offset because the mother has a child support obligation, and that creates that again based on the child support guidelines worksheet. And let’s say, for example, that the mother gets in a car accident and dies, and now the father has the child 100% of the time. Well, then that child support amount is then in that life insurance policy. And also vice versa. Even if the father is the one paying the child support, and if he gets in an accident and dies, well then at least the mother gets the child support as it was calculated. And so, again, so long as it is reasonably available and reasonably affordable, then both parties should obtain life insurance to guarantee the support obligation. So hopefully that answers that question for that listener, and I look forward to taking more questions from you in the future.

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